Go back and see for yourself that my data is correct. Enterprise value is market cap plus debt minus cash and cash equivalents. Market cap is 19.3 trillion, debt is 14 trillion, and cash is 1.8 trillion.
Approximately 85 percent of listed stocks today are at least 50 percent over valued, the most since year 1928/1929.
The enterprise value of the stock market is over 31 trillion dollars, almost double the size of the economy! That is a bubble for sure. It was only a little over 20 trillion in year 2000 and has increased over 50 percent since then. Revenues are only up about 49 percent over the same time period. We are in MASSIVE bubble that is unprecedented in history. The average stock today is even more over valued today than in year 2000. That is irrational and dangerous. The stock market today is a very dangerous bubble!
Stocks are doomed long term. The rally since 2009 is all FED driven. There has been barely any increase in revenues and earnings gains are mostly from cost cuts: layoffs and refinancing debt at lower interest rates. That is not sustainable long term. We are in a huge global bubble like never before. Get defensive!
Company after company is warning that earnings estimates are way too high. There will be no increase in earnings for the 4th quarter and it only gets worse next year! The rally is sentiment driven and it will end very badly at some point. Most of the earnings over the past year has come from only a few companies: the banks and a few others. The average company is not doing well at all and will report earnings down year over year. Earnings have already peaked or very near a secular peak. 2014 will be all down hill for the fundamentals.
Stocks are grossly over valued and way over due for a huge crash. We have NOT had a true major bear market since 1929. My mother was born in 1929 and that was 84 years ago. I am going to short the market and I do not care if it works out or not, there is no better way to become poor than shorting a huge stock market bubble like this. There has been no earnings increase this year for the Russell 2000 and the DOW and yet both are up huge percentage. This is not rational! People are chasing returns and not paying attention to valuation!
Higher profit margins increased earnings over the last two years while revenue growth has been extremely weak. This is not sustainable and a return to high growth will lower profit margins and a bust will tank profit margins. It is time to review your risk tolerance NOW. The DOW is near my 1929 bubble line and that is remarkable because even back in 1966 when the DOW was near 1000 and began a 16 year sideways market, it was almost 50% below that bubble line! Stock prices today are very high and this is very unfavorable for the buyer long term. The three most important things to consider before investment are price, valuation, and growth. Prices today relative to the bubble line are almost as high as 1998 and 2007. The valuation appears reasonable but like in 2006 profit margins are extremely high and even higher now and price/revenue is very high. Valuation is really much higher than it may first appear. Growth is very slow and will remain so until the corporate blue suits decide to spend more which will lower profit margins but should increase revenue growth. The increased revenue growth will not likely offset the decline in profit margins and earnings will decline. If there is a bust earnings and profit margins will tank big time.
He was NOT even called Jesus in the earliest writings.
December 25th was celebrated as the birth of Jesus from the beginning!
Corporate profit margins have no where to go but down from present levels either through much higher wages and benefits to workers or a collapse in revenues like in year 2008.
The focus on constant cost cutting is an impediment to grow and will lead to economic stagnation and then bust. The corporate blue suits must change their strategy for increasing corporate earnings from transferring money from the worker benefits and wages to bottom line to the opposite, higher wages and benefits. The stock market today is trading off of 30 year trends that have gone so far that meager wage growth is becoming a big problem. In the 1980s it was not a big problem because the trends were recent then and people could borrow to make up the difference. Today after more than 30 years of no real wage growth the government must step in and provide economic assistance to unemployed workers otherwise corporate revenue would suffer greatly. BUT the government cannot continue to provide support with massive deficit spending! It is now time for the corporate blue suits to change their views on worker compensation. They must open the wallet and spend much more on employees and hire more of them. This is necessary to avoid a bust!
High corporate profit margins means very slow growth! Margins must decline significantly and wages must rise or the economy will be stuck in muddle through state or BUST!
The stock market is near inflation adjusted tops in 2000 and 2007. Stocks are in the danger zone, get defensive. Valuations are also very high similar to September 1929 top. The FED has created a huge global bubble. C corporate paper is yielding only 6 percent. This is insane and a bubble.
Of all assets that are real and tangible and without debt or derivative risk there are none except gold and other hard assets yet gold has fallen huge percentage while other assets such as stocks have soared, There is nothing that terrifies central bankers more than rising gold prices. India has huge taxes on gold imports and others may follow. Gold is the most hated asset right now. The decline in gold prices this year is a sign the emerging markets economy are in very deep trouble. Very high debt levels and slow wage growth depress inflation and risk deflation and collapse. This is the big risk right now. The end game will be currency collapse that will get very ugly and during this time frame gold could really soar. Will it soar from $400 or $800.00 or possibly even $200 or even $90.00? At some point gold will bottom and when the day of reckoning comes gold will be a huge winner, so much so that the government may try to ban it.
The DOW has a long history and like today there was a stock market bubble in the 1920s when the DOW rose from 60 to 381 September 3, 1929. A good reliable measure of valuation is to compare the DOW adjusted price today to the 1929 high by drawing a line, called the bubble line, from high in 1929. The bubble line rises at a rate of 4.56% and begins at the DOW high in 1929 and extends to 16,489 January 1, 2014. That line today is a only a small percentage distance from present levels! The DOW rose above it for the first time in January 1998 and by January 2000 it was 30% above it! That is a huge bubble since the bench market for a bubble is the adjusted 1929 high. At the bottom in March 2009 it was approximately 50 % below the bubble line about the same percentage below it in January 1992. We only got back to the valuations in the early 1990s which while much lower than present are not any where near secular bear market low valuations. In January 1983 the DOW was 75% below the bubble line. From that level it could have risen almost 300 % and still be below it.
There has in fact been no secular bear market 2000 to 2013, the market was just range bound those years, but high valuations has persisted and again reaching extreme levels. In a true secular bear market valuations become extremely low at bottoms and remain low for many years. The FED has prevented a reset in valuations and this means returns are going to be very low from these highly inflated levels.
The stock market bubble in the 1920s went on for a while, the skeptics looked foolish until the great crash in 1929. Hussman is right about valuations, but high valuations does not mean a stock market top is imminent. It does however mean that risk is high and the downside is tremendous.
The stock market crashed nearly 50 percent after the top in 2000 despite extremely favorable monetary policy and interest rates, and strong economy. The same in 2008, the economy was strong in 2007 and 2008, interest rates were low and in 2008 the FED was easing yet the stock market plunged 58% from high.
John Hussman, the great money manger , is warning about the bubble in stocks. The median stock valuation today is even higher than in year 2000! It is extreme and the worst in decades. Although the market valuation in year 2000 was higher today, the median stock valuation was lower! We are in a huge global bubble. When and IF the stock market reaches its peak valuation in year 2000 around 240 for SPY, the median stock valuation should be astronomical! This may become the greatest stock market bubble in history! Keep buying because we are still not quite at year 2000 market valuations, but beware that the median stock is more overvalued today than in year 2000!